A bank draft or banker's draft is a check that it guaranteed by the bank that issues it. In most cases, it lists the bank's main office or branch as the issuer, and the person or company that is receiving the money as the payee; the name of the person who requested the draft is often not included. Unlike a personal check, which could bounce if the account holder doesn't have enough money to cover it, there is virtually no chance that a legitimate bank draft will not be honored and payed in full. This term is more commonly used in the UK than it is in the US, where a cashier's check is a similar, more common method of guaranteed payment.

How To Get One

To get a bank draft, a customer must make a request at the bank, which often involves some paperwork. The bank will make sure that the customer has enough money to cover the amount being requested, and deduct that money from the person's account. The draft will then be issued, naming the bank itself — usually the main office — as the entity making the payment, and it is typically signed by at least one manager. It's given to the person who requested it, who can then use it to pay for his or her purchase. Because the draft is written on the bank itself, payment is guaranteed in most cases.

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The person who requests the draft is usually charged a fee, set by the amount of the check. Many people find that the security of this type of payment is worth the cost, however, especially for one-time payments. Customers who must regularly purchase many bank drafts may be able to get a discount.

How To Cash One

It is usually not necessary to have an account to cash a bank draft. The payee can typically take it to any bank and be given the amount of the check in cash. If the draft is for a large amount, however, the bank may require it to be deposited directly into a checking or savings account. It may be possible for the payee to open an account, however, so that he or she can access the money.

Uses

Most of the time, bank drafts are used by people who need to make large payments. Someone might need to use one to put down a deposit on a house, for example, or to pay for a car bought directly from a private seller. They are considered much more secure than personal checks, since the funds are coming from the bank rather than the individual, and are especially useful in situations where the seller doesn't have the ability to take a credit or debit card as payment.

Advantages

The biggest advantage of using a bank draft is that the payment is guaranteed, both for the buyer and the seller. While some people might prefer to pay with cash, this is not very secure, especially when large amounts of money are involved. In addition, getting a secured draft provides a record of the transaction should there be any question about it, whereas cash does not. The draft is usually made out to the individual to whom the payment is made, and this is also recorded. How much cash was withdrawn from the requester's account is listed on bank records, although it may not be possible to prove that the money was then given to a third party.

Authenticity

Despite the guarantee of payment in cases where a bank draft is legitimate, this form of payment is sometimes the subject of fraud. The name of the person making the purchase never appears on the draft, so a criminal could create a fake check that appears to have been issued by a real bank and never have to include a real (or false) name. Most authentic checks include holograms and other security features, but if the seller isn't familiar with what a real one looks like, he or she could be fooled. A fraudulent bank draft will not be paid.

Experts recommend caution when accepting a bank draft as payment, particularly during times when financial institutions are typically closed, such as on a Friday night or a weekend. Payment that is offered for goods before the potential buyer has even seen them should also be suspect. A potential buyer who shows up with a bank draft in hand on a Sunday morning to buy a car from a private seller without even asking to test drive the car is probably up to no good. Sellers should never accept a form of payment that seems questionable or that cannot be verified.

International Transfers

It is possible to send a bank draft by mail to another country to transfer currency. Policies on international drafts vary, so customers who want to transfer money this way should contact their bank directly with any questions. The person requesting the draft usually makes the request in his or her local currency, which is converted to that of the payee when the draft is issued. In many cases, an international bank draft must be deposited into a bank account and cannot be submitted for cash.

Additional fees may be involved when international bank drafts are purchased and deposited. One main advantage of using this form of payment is that it usually clears much more quickly than a personal check, often in the same amount of time it takes a local check to be cleared. Sending the draft by certified mail with a tracking number can help to ensure safe delivery.

Automatic Bank Drafts

Many companies now accept what are sometimes known as automatic bank drafts (ABDs), in which money is taken out of the payer's account electronically at regular times. Also known as an automatic payment, automatic bill pay, and other terms, this type of draft differs in that no paper check is ever issued. The customer must agree to the terms of the payment, which sometimes includes extra fees; authorize the company to deduct the funds; and provide his or her account number, routing information, and/or a voided check. This type of draft is most often used to pay for utilities, mortgage, insurance, and other important bills.

Cashier's Checks and Certified Checks

A bank draft, cashier's check, and certified check are similarly guaranteed methods of payment, but do have some slight differences. The main distinction between these three types of payment are when the money is transferred and who is issuing the check.

Cashier's checks are very similar to bank drafts, and in many cases are considered the same thing. Rather than being issued from the bank's home office or main branch, however, a cashier's check may be written from the particular branch where it is requested. It may also be signed by the cashier or another official at the bank, rather than the manager. The funds are still transferred from the customer's account to the bank, which then issues the check on its own account.

A certified check is written on the account of the person requesting it, not the account of the bank itself. The bank certifies that the person's account has enough money in it to cover the check, and usually "earmarks" those funds so that they can only be used to pay the check. This type of check often clears much more quickly than a personal check.

Discuss this Article

I have an international bank transfer from a Mexican peso account which has the peso symbol, however it is for sterling and has GBP on it after the total amount. The bank said it can not be used as it has two currencies. Anyone have any ideas how I can get round this?

Question 1: After receipt of the bank daft in the mail and deposit in our company account, and deposit of funds by the bank (after two to three weeks), is it safe to send the ordered goods? I have heard that even after the bank’s clearing process which takes about two weeks, the bank may withdraw from your account months later. This is really frustrating for us, typical sellers who are not unaware of bank processes.

Question 2: Even though the bank clears the check, how long should we wait to make sure everything is fine?

Question 3: Even if is a scammer who is the customer, I strongly believe we have no right to label our valuable customers in any way whatsoever, as these are accepted payment methods. The frustrating part is bank clears funds as mentioned in question one, and during withdrawal.

We would like to know how long the seller should wait (even though the bank has cleared, and notified the seller) to make sure the customer (in a case they are a scammer) can not possibly withdraw funds from the seller’s bank account.

Our main requirement is at the moment is to know exactly how this bank draft process works, especially the time period after which a scammer can’t do anything, so we can even avoid banking errors.

We really like to treat our respected customers well. We are willing to notify our customers about the time required to wait for the payment of bank draft without this nonsense.

Moderator's reply: Thank you for visiting wiseGEEK and for contributing to the discussion forums. "Cheque" is the more common spelling in the UK. In the U.S., "check" is used, and since most of the wiseGEEK writers are from the U.S., this is the spelling they use. Webster's New World Dictionary, Third College Edition, lists either spelling as correct.

@Anon81855: The reason a bank will verify the draft before allowing the payee to draw upon it is because dishonest people try to counterfeit documents like bank drafts to steal money from the bank. They verify bank drafts for security purposes -- to protect their funds.

Is it possible to get a bank draft in Kuwait from payroll monies and take the bank draft to another country and receive cash? Being a way to transfer payroll money from one country to another and receive cash? Will the money be secure and safe by doing this?

I use bank draft/cashier's order to send money to family abroad. The fee is very low compared to wire transfer since I only pay a small amount (5 percent of amount, capped at $10). And I could ask for any foreign currencies that the recipient would like to receive in (or according to his bank account currency).

The recipient normally needn't pay so much to collect the money as well. Normally a bank won't charge any fees if the recipient cashes in the bank draft into his account in that bank. Otherwise, he could cash this draft at any banks with a small commission (works like a traveller's cheque).

Other charges that may be involved is the postal fees (sometimes banks offer to send this too). I suggest to send this draft via registered mail.

And lastly, this sort of overseas transfer via bank drafts are meant for non urgent payments, considering the time it may take for the drafts to reach the recipient.

I own a fitness club and our monthly dues are secured by bank drafts. Each month I submit a draft to the bank for the customer's dues. When I get one back for insufficient funds or stopped payment, I send it to the hot check office and they collect it for me. I have never had a problem collecting until recently which causes me to wonder if me sending them to the hot check office is legal.

I attempted to collect as usual from this one customer, the hot check office contacted her and she came to my office extremely upset, telling me she was not going to pay it, that if I pursued it she would take it to court, that she had talked to her attorney and he supposedly called here and there and told her she did not have to pay it, that it was not a hot check and that if I pursued it they would counter sue me for back payments. When a person signs up they sign a 1 year contract. The contract states if they want to cancel they have to come and physically sign a cancellation. That after the 1 year contract is up, the drafts would continue to be drawn until we have a signed cancellation. The reason for this is that we never know if, just because they have not been here for awhile, we do not know if they intend to cancel or not. They might be on vacation, sick or whatever and if we cancel them and they come back, they are going to be mad because they cannot work out since we have canceled them for lack of activity. Lots of customers come in and go, out for a short while or a long time, we do not know. We do not cancel them for that reason.

There is the history, I need to know if these drafts are as good as a check, if they are collectible thru the hot check office. The legalities of it all. Please advise.

i ask you what is that bank draft.? im not sure what is bank draft i got the mail from the letter in order to have this parcel deliver to your door step,you are to make up with this company to enable us commerce on the saft delivery of your parcel to your door step. this company to in other for the bank Draft release to you as the beneficiary.

Two comments on bank drafts. First, certifying your check, this is an old, cumbersome, time consuming way to guaranty the funds of your check. The bank will take your check, withdraw the funds from your account, and punch out the account numbers on your check. They will stamp it certified, a bank official will sign it and will give it back to you. Why use this form of draft? If I receive a large check from a person and my bank won't accept it, I can take the check to the drawee bank and have it certified. Then I can freely deposit it in my bank. Why not issue a Cashiers Check in lieu of the check? I have seen instance occur. An auto dealership accepts a large check from the customer. The salesman takes the Cashiers Check to the bank and gets a Cashier's Check in lieu of the original check, with the Cashiers Check made out to the auto dealer. The salesman then bought himself a new car with the Cashier's Check, something he could not have done if the check was certified.

The other draft is a draft drawn on local funds. If I buy a Cashier's Check in Oregon and go to Florida and expect to receive immediate availability, I will not because it can take two to three days for an Oregon check to clear from Florida. If I draw a draft in an Oregon Bank drawn on one of that bank's correspondent in Florida then the funds will clear overnight.

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